Reaffirming the Importance of Appeal Deadlines Under the Contract Disputes Act

The following article was first published by Chadd L. Reynolds in the Division of Government Construction’s September 2016 Newsletter for the American Bar Association’s Forum on Construction Law.

A recent United States Court of Federal Claims (“COFC”) decision emphasizes the importance of deadlines for appealing a contracting officer’s (“CO”) decision under the Contract Disputes Act (“CDA”).  On July 22, 2016, the COFC granted the consolidation of two naval contract dispute appeals totaling nearly $12.4 million in response to Nova Group/Tutor-Saliba’s (“NTS”) motion to resolve two Requests for Equitable Adjustment (“REA”) in the same forum.  See Nova Group/Tutor-Saliba v. United States, No. 15-885C, 2016 WL 4009886, at *5 (Fed. Cl. July 22, 2016).  NTS’s motion before the COFC sought to transfer an appeal of a REA before the COFC to the Armed Services Board of Contract Appeals (“ASBCA”), where another appeal of a REA arising under the same contract was presently on appeal.  The COFC rejected NTS’s appeal to transfer the REA to the ASBCA because NTS did not appeal the REA within the 90-day limit under the CDA.  Instead, the COFC allowed NTS to transfer the REA before the ASBCA to the COFC because timeliness was not an issue.

In Nova Group/Tutor-Saliba, NTS, the plaintiff, entered into a contract with Naval Facilities Engineering Command (“NAVFAC”), the defendant, to design and construct a ship repair wharf at the Puget Sound Navy Shipyard in Bremerton, Washington.  The project was to be completed within 1,345 calendar days and liquidated damages were set at $35,475 per day.  NTS submitted its design plans to NAVFAC and were approved on November 12, 2009.

On March 8, 2010, NAVFAC questioned NTS’s design and whether NTS’s architect-engineer and designer of record, KPFF Consulting (“KPFF”), chose the proper analytics method to calculate global instability of the structure.  In response to the concerns, NTS halted construction and began a design re-evaluation from March 8, 2010 until May 27, 2010.

For the re-evaluation, KPFF’s independent third-party designer concluded that the government approved design complied with the requirements of the contract and KPFF’s design method was appropriate.  NTS resumed construction on May 27, 2010 and accelerated the remaining work, increased manpower, equipment, and overtime in an effort to make up for lost time.

NTS’s motion to transfer involved two REAs.  REA #14, the suit before the COFC, sought costs totaling nearly $1.9 million for work stoppage and the subsequent work acceleration resulting from the design re-evaluation.  REA #9, the ASBCA appeal, sought costs totaling nearly $10.5 million for increases in the scope of work related to differing cite conditions experienced during pile driving.  The contracting officer (“CO”) denied REA #14 on September 4, 2014 and denied REA #9 on August 12, 2015.

On April 6, 2016, NAVFAC filed an unopposed motion to stay the proceeding in the COFC based on NTS’s representation that NTS was considering seeking a transfer of the appeal in the COFC to the ASBCA.  Eventually, NTS filed with the COFC its unopposed motion to transfer on May 31, 2016.  In the alternative, NTS sought to transfer the ASBCA appeal to the COFC.

In response to NTS’s motion, the COFC highlighted NTS’s admission that it did not file the COFC case before the ASBCA because it failed to appeal REA #14 within the 90-day requirement under the CDA.  NTS argued, however, that although the ASBCA would not have jurisdiction over REA #14, the COFC could confer derivative jurisdiction to allow the transfer under Section 7017(d) of the CDA.  The COFC agreed that subsection (d) permits transfer of actions arising from the same contract, but does not contemplate whether transfer would be appropriate if an action is time-barred.

NTS argued that Glenn v. United States, 858 F.2d 1577 (Fed. Cir. 1988) supported its proposition that the COFC could transfer the current case to the ASBCA despite it being time-barred.  In Glenn, the plaintiff appealed a CO’s liability decision to the ASBCA.  Later, the CO issued a quantum decision that was appealed to the COFC because the 90-day time limit had passed.  The plaintiff sought transfer of the quantum decision to the ASBCA.  The Federal Circuit disagreed with the trial court’s decision to deny transfer, and held that the ASBCA had jurisdiction because the quantum decision supplemented the liability decision.  Leaving the quantum decision, which contained the same facts as the liability decision, in the COFC would give rise to the possibility of two tribunals rendering inconsistent decisions.

In its decision in Nova Group/Tutor-Saliba, however, the COFC held that Glenn did not support NTS’s argument for transferring and consolidating both appeals before the ASBCA.  The COFC specified that Glenn was a “unique” and “unusual” case that articulated a narrow rule permitting a supplemental claim to be transferred to a forum where it would otherwise be time-barred.  Unlike in Glenn, the government’s final decision on REA #9 was not a supplement to REA #14.  Although both appeals arose from the same contract, the COFC pointed out that they consist of entirely different factual and legal scenarios that occurred at different times and sought different relief.  There was no risk, as there was in Glenn, of two tribunals rendering inconsistent decisions because the circumstances underling both appeals were legally and factually dissimilar.

The COFC also rejected NTS’s argument to support transfer based on the ASBCA appeal progressing further than the COFC appeal.  NTS asserted that in the ASBCA proceeding, NAVFAV already answered NTS’s complaint, written discovery had been served by both parties, and discovery was set to close on November 30, 2016.  The COFC responded by noting that such progression, if true, was entirely due to NTS’s handling of both appeals.

Accordingly, the COFC held that transfer of REA #14 to the ASBCA was not warranted.  But, the COFC granted NTS’s alternative request to transfer the ASBCA appeal to COFC because timeliness would not be an issue.

Nova Group/Tutor-Saliba is an important reminder of the CDA’s deadlines for appealing a CO’s final decision.  When appealing to the ASBCA, a contractor has only 90 days to appeal a CO’s final decision.  The 90-day period starts from receipt of CO’s decision.  This 90-day period is much shorter time than the 12-month deadline for appeals to the COFC.  Here, the COFC made clear that transfers to the ASBCA of appeals filed beyond the 90-day time period are only permitted under “unique” or “unusual” circumstances.  Therefore, when a CO’s decision is received by a contractor, the contractor must quickly determine which forum is most desirable.